I thought the ECB was being calculated last week when they allowed Italian spreads to blow out. As spreads were blowing out they said they would not continue to buy bonds unless there was reform. It seemed like they were strong arming Italy into reform. They got their way as Italy passed austerity measures and PM Berlusconi handed the reins over to Mario Monti.
I expected the ECB to defend spreads this week as a reward for reforms but spreads continue to blow out and the ECB continues to be reactive. I have come to realize that there is no method to their madness. They are simply waiting until Europe is on the edge of the abyss to react at which point they do the minimum to save it. The ECB, especially hawks in Germany, do not understand a simple concept. If banks try to delever and sell trillions of dollars of debt somebody needs to buy that debt. All the reform in the World will not buy that debt.
There are some pieces of good news in this. It is unlikely that Europe will be allowed to fall into the abyss at this point. The other piece of good news is that we are once again nearing a crisis point so this will likely spur the EU and ECB into action very soon.